After trending higher for much of the second half of last year, Ford Motor (NYSE:F) is ready to break out. This time, the company has reasons to attract strong buyers.
Ford brought in a new CEO recently. Its Q4/2020 report is promising. Revenue fell by just 9.3% Y/Y to $36 billion, despite the pandemic severely hurting automotive traffic. Adjusted EBIT rose to $1.71 billion, up from $230.4 million last year.
The ICE (internal combustion engine) supplier is pivoting to electric vehicles. While EV stocks enjoy infinitely higher valuations, Ford produces cash flow. EV companies lose money but the stock rises on delivery figures. Ford will start reporting EV sales for Mach-E. If each unit sale is profitable, EV fans have a reason to sell some EV-based stocks and to hold Ford. General Motors (NYSE:GM) is also relatively inexpensive.
Ford has an off-road Bronco in its line-up. The F-150 is a reliable product that enjoys strong sales. Since Q4 did not benefit from these products, the sky is the limit for the next EPS figure. Chances are good that free cash flow will increase. That will allow Ford to re-instate its dividend.
Ford could arguably hold off on paying a dividend, diverting the cash from operations towards research and development. Software quality and technology content in its vehicles will only rise. If Ford sees itself as a technology company having vehicles, it could catch up to Tesla’s valuation.
The author owns shares of Ford.
